When it comes to a successful procurement function, strategy is everything.
An effective procurement strategy will help your organization manage your budgets, boost your profitability, streamline your processes, compress lead-times, and ensure everyone is singing from the same company hymn sheet.
A lackluster procurement strategy can leave you open to risk, and your organizational performance leaving something to be desired – and adversely affect your bottom line.
To keep your cash flow in peak flow, a documented, transparent procurement strategy is what you need to take your procurement performance to the next level. All procurement strategies should be a bespoke solution to your business’ unique needs and processes. Your strategy will have a host of considerations to take into account, not limited to current market climate, organizational goals and objectives, market share, performance and levels of stakeholder engagement.
Your procurement strategy will have a range of objectives, including:
- minimizing the potential for error
- maximizing cost-savings
- aligning the procurement function with company objectives
- ensuring compliance and adherence to domestic and foreign policy and regulatory issues
- reducing inefficiencies and creating time-saving opportunities
- building and managing strategic partnerships with suppliers
Here we detail four considerations for building your organization’s procurement strategy:
1. Know where you are to discover where you want to be
Before you can identify areas for improvement, first you need to find out where things are going wrong and what needs to change. Analyze your strengths and weaknesses, checking how your current strategy aligns with organizational objectives, and how it would cope with future challenges. Identify holes in your spend and areas where systems could be tightened or refined to drive efficiency and cost savings.
2. Encourage collaboration with stakeholders
If you want stakeholder support in the delivery of your procurement strategy, then you need to involve them in its inception. There is no point devising your strategy based on your own priorities alone – it needs to translate to a workable process for all who have a stake in it. Communicate and collaborate with everyone involved to gain insight and perspective into what your strategy needs to be and how it needs to work in reality.
Listen to and empathize with the views of all stakeholders and be a champion of positive communication across all departments. When you meet resistance, it pays to remind all parties that an effective procurement strategy should benefit everyone in terms of tightening up timescales, reducing workload and stress, streamlining administration and protecting against risk – direct cost-savings are paramount, but not the only factor to consider.
3. Prioritize your goals
Although objective number one will undoubtedly be ‘make more money’, there will be far more to your vision of the future than simply a healthier bank balance. Your goals could range from improving delivery times, meeting your internal sustainability targets such as those advized by the United Nations Development Program’s Practitioner’s Guide to Sustainable Procurement. Your main priorities could also be boosting sales revenue or eliminating maverick spend.
Like all KPIs, the goals of your procurement strategy should be SMART – specific, measurable, achievable, relevant and time-bound. You need to know what needs to happen and why, how you will keep track of it, who is responsible for it, and when it needs to take place.
4. Track results and be prepared to respond to change
It is important to monitor your procurement strategy for success and always be evaluating KPIs to ensure your organization is getting the most out of the process. Stakeholder collaboration and engagement remain crucial in maintaining and improving the real-life functionality of your procurement strategy. If something isn’t working, admitting fault in a process doesn’t equate to showing weakness. The constantly evolving business landscape means your organization’s needs will also be constantly evolving, and so should your procurement strategy to remain current and effective.
With these four example considerations for a successful procurement process in mind, your business should be able to identify and act on what is uniquely important to your organization in today’s market.
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